Facebook Continues To Be The Stock To Own In 2017

| About: Facebook (FB)
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Summary

The social media giant has now dipped its toes into the pool of one of the largest investing theories the world has seen manifesting itself right before our eyes.

To broaden its offerings in making revenues grow, the company is looking to offer original programming content on its platform.

In addition to the shares I own in my Portfolio of 12 and 401k, I levered a different portfolio with the purchase of a couple of call options.

Shares of Facebook (NASDAQ:FB) continue to move higher this year and the move may not be over. The social media giant has now dipped its toes into the pool of one of the largest investing theories the world has seen manifesting itself right before our eyes; the stay at home economy. Shares of companies like Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN) and Domino's Pizza (NYSE:DPZ) have skyrocketed over the past year while shares of quick serve restaurants like Cracker Barrel (NASDAQ:CBRL) or Buffalo Wild Wings (BWLD) and mall related stocks like Macy's (NYSE:M) have been relatively stagnant or been plummeting (see chart below). Facebook is now trying to participate in this massive socioeconomic shift by entertaining pitches for video content.

Source: Google Finance

To broaden its offerings in making revenues grow, the company is looking to offer original programming content on its platform. The company is looking to offer its users content which lasts approximately thirty minutes in six genres. The focus will be on sports, science, pop culture, lifestyle, gaming, and teens and is looking to procure the content for them as opposed to opening a studio of its own.

The pricing model that is currently being entertained is something from the low to mid six digits per episode along with a piece of the ad revenues. Original content has been a hot trend the past couple of years which was kicked off by House of Cards. With Facebook's foray into the space, it will certainly crowd the market for Amazon and Netflix, but because more and more people are staying at home, the pie should continue to grow. The Facebook ecosystem can only become stickier now among its users as it tries to hold on strong to the social media crown with an offering of this nature.

This is perhaps Facebook's attempt at copying Snap's (NYSE:SNAP) Discover which was launched a little while ago which makes it another feature the company is imitating from Snap if you include the Stories feature. Snap's Discover allows users to view content curated by other users as opposed to friends. Imitation is the best form of flattery I guess, right? But this goes to show that there isn't anything unique about what these guys do from a product perspective. This will be a war where the best management team will win. And right now Facebook is the management team that has built its credibility with Wall Street with Snap having a lot to prove.

Before this news I felt that the only direction for Facebook this year was higher. I predicted that it's the stock to own in 2017, and so far, I have been proven correct. So, in addition to the shares I own in my Portfolio of 12, I levered a different portfolio with the purchase of a couple of call options at the $135 strike for the March expiration. Right now the value of those calls have decayed from what I originally purchased them at, but when I purchased those calls, I funded the purchase by writing $120 strike March expiration puts and $140 strike March expiration calls for a net credit of $0.15.

I actually initiated my position in Facebook in late November and have been pretty happy with the purchase thus far. I will only be purchasing shares if they are below $121 because I believe that is where Facebook offers additional value. I've selected $121 because it is the average of the 52-week range.

I swapped out of Priceline (NASDAQ: PCLN) for Facebook during the 2016 fourth-quarter portfolio change-out because I ended up turning a profit in the name (32.7%, or 33% annualized) and wanted to lock in those gains. Since the swap, it has been a pretty even trade. For now, here is a chart to compare how Facebook and Priceline have done against each other and the S&P 500 since I swapped the names.

Source: Google Finance

When it is all said and done, it matters what the stock has done in an investor's portfolio. For me, Facebook is one of my larger positions and has been doing well as I'm up 12.9% on the name while the position occupies roughly 9.6% of my portfolio. I will make purchases in the stock only if it is below $121.

I own Facebook for the growth portion of my portfolio and I will continue to hold onto the stock for now. My portfolio is up 16.7% since inception while the S&P 500 is up 14.6%. Below is a quick glance at my portfolio and how each position is performing. Thanks for reading and I look forward to your comments.

Company

Ticker

% change incl. DIV

% of Portfolio

Facebook, Inc.

12.86%

9.63%

AbbVie Inc.

(NYSE:ABBV)

8.49%

3.99%

PulteGroup, Inc.

(NYSE:PHM)

1.85%

3.73%

3M Company

(NYSE:MMM)

1.14%

3.71%

SEI Investments Company

(NASDAQ:SEIC)

0.98%

7.41%

O'Reilly Automotive, Inc.

(NASDAQ:ORLY)

-0.25%

3.66%

General Electric Company

(NYSE:GE)

-2.08%

6.18%

Wyndham Worldwide Corporation

(NYSE:WYN)

-2.27%

3.58%

V.F. Corporation

(NYSE:VFC)

-3.38%

9.61%

Valero Energy Corporation

(NYSE:VLO)

-4.13%

3.51%

Gilead Sciences Inc.

(NASDAQ:GILD)

-12.93%

19.91%

Silver Wheaton Corp.

(SLW)

-13.47%

7.52%

Cash

$

17.57%

Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: I am/we are long FB.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: In addition to the shares I own I am long the March $135 call, short the March $120 strike put, and short the March $140 strike call.